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Carrier Billing: Understanding the Other Alternative Payment

Alternative payments like PayPal, Google Wallet, Amazon Payments, BillMeLater, direct debit and even COD are often offered alongside credit card options for payment. Not everyone has a credit card, or wants to share credit card information online. They also speed up the checkout process. Stored shipping and billing information means less typing and less room for error — especially on mobile devices and within apps.

On “second-screens” (mobile phones, tablets and Internet-enabled TVs), simplifying checkout is critical. With 50% of Android apps using in-app billing, leveraging carrier billing makes sense for many developers and sellers of digital products.

What is carrier billing?

Carrier billing (or direct operator billing) is a mobile payment method that bills purchases from third party vendors of digital products.

How carrier billing works

Carrier billing typically uses a two-factor authentication method. The user enters his mobile number and receives a one-time password via text message to complete credentials. This eliminates even friendly fraud (like someone who knows you uses your number) as the buyer must have the device in-hand to complete the purchase.

Is carrier billing the same as a mobile wallet?

A mobile wallet allows you to store information for a number of payment sources, like debit and credit cards, alternative payment services, loyalty cards, coupons and so on in one place. Payment can be made with your mobile phone online or offline using NFC (near field communication). Major players are Google Wallet (replacing Google Checkout) and PayPal, banks like Barclay’s and RBS and even mobile carrier O2.

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Though O2’s mobile wallet app is provided by a telco, the difference between it and carrier billing is it must be backed up by a debit or credit card (like iTunes). A “pay with iTunes” option would also be a mobile wallet, rather than bill-to-carrier.

While Apple has locked down its content markeplace only to iTunes account holders, Android, Microsoft, RIM and Samsung developers can include bill-to-operator options into apps, and technology companies like Google are partnering with these companies. For example, Google Play has partnered with carriers for purchases of its apps, books, music and video. And MOG music service supports billing to Verizon.

Even subscription services like site memberships can bill-to-carrier, with recurring billing.

Who are the players in bill-to-carrier?

Several in-app payment companies that have partnered with mobile operators, including Cashlog, Fortumo, BOKU, Buongiorno and Bango that offer SDKs that developers can integrate into their smartphone and tablet apps. boxPay has partnered with cable operators to support in-app transactions through smart TV apps.

Even Facebook has teamed up with most US and UK operators for seamless in-app billing in June of this year.

What does the future hold for carrier billing?

If telecoms looking to find a new business model consider lowering merchant fees, we may see more applications of it, even extending to physical goods in-store. If consumers catch on, we may have a new “conventional” way to pay.